PART I [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited H1 2025 financial statements show increased revenue, reduced net loss, and decreased cash from investing and financing activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $132.8 million by June 30, 2025, driven by reduced cash, with liabilities and equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $54,342 | $76,692 | | Marketable securities | $48,427 | $41,118 | | Accounts receivable, net | $15,422 | $9,643 | | Total current assets | $120,667 | $130,182 | | **Total assets** | **$132,786** | **$138,677** | | **Liabilities & Equity** | | | | Total current liabilities | $18,540 | $19,023 | | **Total liabilities** | **$19,845** | **$21,282** | | **Total stockholders' equity** | **$112,941** | **$117,395** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported increased revenue for Q2 and H1 2025, alongside a significantly reduced net loss for the six-month period Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $54,310 | $46,058 | $106,492 | $91,474 | | Loss from operations | $(1,790) | $(3,486) | $(2,875) | $(5,165) | | Net loss | $(541) | $(474) | $(223) | $(1,940) | | Net loss per share (Basic & Diluted) | $(0.00) | $(0.00) | $(0.00) | $(0.01) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw net cash used in operating activities, increased usage in investing and financing, resulting in a $22.4 million net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,590) | $1,418 | | Net cash used in investing activities | $(11,386) | $(2,150) | | Net cash used in financing activities | $(9,374) | $(8,263) | | **Net decrease in cash and cash equivalents** | **$(22,350)** | **$(8,995)** | | **Cash and cash equivalents at end of period** | **$54,342** | **$114,913** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business operations, revenue sources by channel (Payor, DTE, Consumer), capital management including share repurchases, and consolidation of VIEs - The company operates as a **single reportable segment**, providing **virtual behavioral healthcare services**. The CEO, as the chief operating decision maker, reviews consolidated results to assess performance and allocate resources[30](index=30&type=chunk)[31](index=31&type=chunk) Revenue by Source for Six Months Ended June 30 (in thousands) | Revenue Source | 2025 | 2024 | | :--- | :--- | :--- | | Payor | $78,343 | $58,453 | | DTE | $18,986 | $19,541 | | Consumer | $9,163 | $13,480 | | **Total revenue** | **$106,492** | **$91,474** | - The Board of Directors authorized a share repurchase program, initially for **$15.0 million** and later increased by an additional **$25.0 million**. In the first six months of 2025, the company repurchased **3,060,438 shares** for **$8.4 million**[53](index=53&type=chunk)[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes H1 2025 revenue growth to the Payor segment, leading to a narrowed operating loss and improved Adjusted EBITDA, while maintaining strong liquidity Key Business Metrics | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Number of completed Payor sessions (thousands) | 735.1 | 582.8 | | Number of health plan customers | 31 | 24 | | Number of enterprise customers | 165 | 187 | | Number of Consumer active members (thousands) | 6.6 | 10.7 | - The increase in revenue for the first six months of 2025 was primarily due to a **$19.8 million (34.0%)** increase in Payor revenue, driven by more completed sessions. This was partially offset by a **$4.3 million (32.0%)** decrease in Consumer revenue, reflecting a strategic shift in marketing focus towards Payor members[96](index=96&type=chunk) - General and administrative expenses decreased by **$1.6 million (12.8%)** for the six months ended June 30, 2025, mainly due to lower severance payments compared to 2024 when certain key executives departed[101](index=101&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss | $(223) | $(1,940) | | Depreciation and amortization | 1,368 | 421 | | Stock-based compensation | 4,688 | 5,359 | | Financial income, net | (2,851) | (3,422) | | Income tax expense | 199 | 197 | | Non-recurring expenses | 1,057 | 1,338 | | **Adjusted EBITDA** | **$4,238** | **$1,953** | [Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in market risk disclosures during the six months ended June 30, 2025, compared to the prior annual report - There were **no material changes** to the information regarding quantitative and qualitative disclosures about market risk during the six months ended June 30, 2025[136](index=136&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[137](index=137&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the second quarter of 2025[138](index=138&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company reports no material pending legal proceedings, consistent with financial statement notes - The Company has **no material pending legal proceedings** as of June 30, 2025[141](index=141&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2024 - During the six months ended June 30, 2025, there were **no material changes** to the risk factors detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[142](index=142&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details share repurchase activity for Q2 2025, with all repurchases in April, leaving $20.6 million available under the program Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | April 1 - 30 | 541,268 | $2.62 | $20,632 | | May 1 - 31 | — | — | — | | June 1 - 30 | — | — | — | | **Total** | **541,268** | **$2.62** | **$20,632** | [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[145](index=145&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[146](index=146&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - **No directors or officers adopted, modified, or terminated** a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[147](index=147&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) The report includes various exhibits, notably CEO and CFO certifications and Inline XBRL data files - Exhibits filed with the report include **CEO and CFO certifications** (31.1, 31.2, 32.1, 32.2) and **Inline XBRL documents** (101.INS, 101.SCH, 104)[150](index=150&type=chunk)

Part I. Financial Information [Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed financial statements for the period ended June 30, 2025, reflect the company's financial position as a special purpose acquisition company (SPAC) following its Initial Public Offering (IPO) Key activities include the company's formation, the IPO in May 2025 which raised $253 million in gross proceeds, and the placement of these funds into a trust account The company has not commenced operations and its financial activity is limited to formation costs, operating expenses, and interest income from the trust account Publicly held Class A Ordinary Shares are classified as temporary equity due to their redemption features - The company is a **special purpose acquisition company (SPAC)** incorporated on **October 9, 2024**, with the objective of effecting a business combination[24](index=24&type=chunk) - On **May 23, 2025**, the company completed its Initial Public Offering (IPO) of **25,300,000 units** at **$10.00** per unit, generating gross proceeds of **$253,000,000**[26](index=26&type=chunk) - Simultaneously with the IPO, the company sold **708,000** Private Placement Units at **$10.00** each, raising an additional **$7,080,000**[27](index=27&type=chunk) - Following the IPO, **$253,000,000** was placed into a trust account, which can only be invested in U.S. government treasury obligations or specific money market funds[30](index=30&type=chunk) [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, the company's balance sheet shows total assets of $255.3 million, primarily consisting of $254.0 million in investments held in the trust account Total liabilities were $9.0 million, and Class A Ordinary Shares subject to possible redemption were valued at $254.0 million, resulting in a total shareholders' deficit of $7.6 million Condensed Balance Sheet Data (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $1,075,364 | $0 | | Investments held in Trust Account | $253,970,067 | $0 | | **Total Assets** | **$255,300,758** | **$145,359** | | **Liabilities & Equity** | | | | Total Liabilities | $8,954,889 | $167,803 | | Class A Ordinary Shares subject to possible redemption | $253,970,067 | $0 | | Total Shareholders' Deficit | ($7,624,198) | ($22,444) | [Condensed Statements of Operations](index=9&type=section&id=Condensed%20Statements%20of%20Operations) For the three and six months ended June 30, 2025, the company reported net income of $843,353 and $818,253, respectively This income was primarily driven by $970,067 in interest earned on investments held in the trust account, offset by formation, general, and administrative costs Statement of Operations Highlights (Unaudited) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Interest earned on investments held in Trust Account | $970,067 | $970,067 | | Formation, general and administrative costs | $126,714 | $151,814 | | **Net Income** | **$843,353** | **$818,253** | | Basic and diluted net income per share, Class A | $0.04 | $0.06 | [Condensed Statements of Changes in Shareholders' Deficit](index=10&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders%27%20Deficit) The shareholders' deficit increased from $22,444 at the end of 2024 to $7.6 million as of June 30, 2025 The change was primarily due to the accretion for Class A Ordinary Shares to their redemption amount, which totaled $19.0 million, partially offset by proceeds from the sale of private placement units and net income - The accretion of Class A Ordinary Shares to their redemption value resulted in a **$19,012,872** reduction in shareholders' equity[17](index=17&type=chunk) [Condensed Statement of Cash Flows](index=11&type=section&id=Condensed%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by financing activities was $254.4 million, primarily from the IPO and private placement proceeds Net cash used in investing activities was $253.0 million for the investment of cash into the trust account Operating activities used $357,152 The company ended the period with $1,075,364 in cash Cash Flow Summary for Six Months Ended June 30, 2025 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($357,152) | | Net cash used in investing activities | ($253,000,000) | | Net cash provided by financing activities | $254,432,516 | | **Net change in cash** | **$1,075,364** | [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial activities Key disclosures include the terms of the IPO and private placement, related-party transactions with the Sponsor, commitments such as registration rights and deferred underwriting fees, and the structure of the company's share capital The company operates as a single segment and has identified no material subsequent events requiring adjustment - The company has a **24-month period** from the IPO closing (until **May 23, 2027**) to complete an initial Business Combination[7](index=7&type=chunk)[31](index=31&type=chunk) - The Sponsor provided an IPO Promissory Note of up to **$300,000** for offering expenses, which was fully repaid at the IPO closing[77](index=77&type=chunk) - The company has an Administrative Services Agreement to pay a Sponsor affiliate **$10,000** per month for office space and administrative support[78](index=78&type=chunk) - On **July 8, 2025**, the company announced that holders of units could elect to separately trade the included Class A Ordinary Shares and Rights, commencing **July 11, 2025**[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's status as a blank check company with no current operations, focusing on its plan to effect a business combination For the six months ended June 30, 2025, the company had a net income of $818,253, derived from interest on trust account investments As of June 30, 2025, the company had $1,075,364 in cash for working capital and $254.0 million in the trust account The primary contractual obligations are a monthly administrative fee and a significant deferred underwriting fee payable upon a business combination Results of Operations Summary | Period | Net Income | Interest Income | Operating Costs | | :--- | :--- | :--- | :--- | | Three months ended June 30, 2025 | $843,353 | $970,067 | $126,714 | | Six months ended June 30, 2025 | $818,253 | $970,067 | $151,814 | - As of June 30, 2025, the company had **$1,075,364** in cash and a working capital of **$1,122,729** to fund its search for a business combination target[38](index=38&type=chunk)[121](index=121&type=chunk) - The company has a deferred underwriting discount of **$8,855,000** payable upon the completion of an initial Business Combination[126](index=126&type=chunk) - The Sponsor may provide Working Capital Loans up to **$1,500,000**, which can be converted into units at **$10.00** per unit upon a business combination[122](index=122&type=chunk) [Quantitative and Qualitative Disclosures Regarding Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20Regarding%20Market%20Risk) The company is a smaller reporting company and, as permitted, has omitted the information required under this item The primary market risk is related to interest rate fluctuations on the investments held in the Trust Account - As a smaller reporting company, the registrant is **not required** to provide the information for this item[133](index=133&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of June 30, 2025 There were no changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal quarter ended June 30, 2025[135](index=135&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter[138](index=138&type=chunk) Part II. Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there is no material litigation currently pending or contemplated against it, its officers, or its directors - To the knowledge of management, there is **no material litigation** currently pending or contemplated against the company[140](index=140&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company is not required to include risk factors in its quarterly report It directs investors to the 'Risk Factors' section of its IPO Registration Statement for this information - The company is a smaller reporting company and is **not required** to include risk factors in the Form 10-Q[141](index=141&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the use of proceeds from the May 23, 2025 IPO and the simultaneous private placement of units The IPO generated $253 million in gross proceeds, and the private placement to the Sponsor and BTIG generated $7.08 million An aggregate of $253 million was deposited into the trust account Use of Proceeds from Offerings | Offering | Gross Proceeds | | :--- | :--- | | Initial Public Offering | $253,000,000 | | Private Placement Units | $7,080,000 | | **Total Offering Costs** | **$14,529,940** | | *Cash Underwriting Fee* | *$5,060,000* | | *Deferred Underwriting Fee* | *$8,855,000* | | *Other Offering Costs* | *$614,940* | - The private placement of **708,000 units** was conducted under the exemption from registration provided by **Section 4(a)(2)** of the Securities Act[143](index=143&type=chunk) [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities - **None**[147](index=147&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - **Not applicable**[148](index=148&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company confirms that none of its directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - During the quarterly period, none of the company's directors or officers adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[149](index=149&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key legal and financial agreements such as the Underwriting Agreement, Investment Management Trust Agreement, and Registration Rights Agreement, which are incorporated by reference from a previous Form 8-K filing - The report lists key agreements filed as exhibits, including the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, and various Private Placement and service agreements[153](index=153&type=chunk)

Part I. Financial Information [Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) As a special purpose acquisition company (SPAC) that completed its IPO in May 2025, the company's financial statements reflect its pre-business combination status. As of June 30, 2025, total assets were $255.3 million, primarily consisting of $254.0 million in investments held in a trust account. Total liabilities were $9.0 million, mainly deferred underwriting fees. For the six months ended June 30, 2025, the company reported a net income of $818,253, derived entirely from interest earned on the trust account, as there were no operating revenues. The company maintains sufficient liquidity for its operational needs while searching for a business combination target [Condensed Balance Sheets](index=8&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $1,075,364 | $0 | | Investments held in Trust Account | $253,970,067 | $0 | | **Total Assets** | **$255,300,758** | **$145,359** | | **Liabilities & Equity** | | | | Total Liabilities | $8,954,889 | $167,803 | | Class A Ordinary Shares subject to possible redemption | $253,970,067 | $0 | | Total Shareholders' Deficit | ($7,624,198) | ($22,444) | [Condensed Statement of Operations](index=9&type=section&id=Condensed%20Statement%20of%20Operations) Statement of Operations Summary (Unaudited) | Period | Loss from operations | Interest earned on Trust Account | Net Income | Basic and Diluted Net Income per Share | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended June 30, 2025** | ($126,714) | $970,067 | $843,353 | $0.04 | | **Six Months Ended June 30, 2025** | ($151,814) | $970,067 | $818,253 | $0.06 | [Condensed Statements of Changes in Shareholders' Deficit](index=10&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders%27%20Deficit) - The total shareholders' deficit increased from **($22,444)** at December 31, 2024, to **($7,624,198)** at June 30, 2025. This change was primarily driven by a significant accretion for Class A Ordinary Shares to their redemption amount, partially offset by proceeds from the sale of Private Placement Units and net income[17](index=17&type=chunk) [Condensed Statement of Cash Flows](index=11&type=section&id=Condensed%20Statement%20of%20Cash%20Flows) Cash Flow Summary for the Six Months Ended June 30, 2025 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($357,152) | | Net cash used in investing activities | ($253,000,000) | | Net cash provided by financing activities | $254,432,516 | | **Net change in cash** | **$1,075,364** | | **Cash and cash equivalents, end of the period** | **$1,075,364** | [Note 1: Description of Organization and Business Operations](index=12&type=section&id=Note%201.%20DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) - Oyster Enterprises II Acquisition Corp is a special purpose acquisition company (SPAC) incorporated on October 9, 2024, to effect a business combination. As of June 30, 2025, it had not selected a target[24](index=24&type=chunk)[25](index=25&type=chunk) - On May 23, 2025, the company consummated its Initial Public Offering (IPO) of 25,300,000 units at **$10.00 per unit**, generating gross proceeds of **$253 million**. This included the full exercise of the underwriters' over-allotment option[26](index=26&type=chunk) - Simultaneously with the IPO, the company sold 708,000 Private Placement Units at **$10.00 each**, raising an additional **$7.08 million**[27](index=27&type=chunk) - Following the IPO, **$253 million** was placed in a U.S.-based trust account, which can only be invested in U.S. government treasury obligations or specific money market funds[30](index=30&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=16&type=section&id=Note%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The financial statements are prepared in accordance with U.S. GAAP for interim financial information[43](index=43&type=chunk) - The company is an "emerging growth company" and has elected to use the extended transition period for new accounting standards, which may make financial statement comparisons with other public companies difficult[45](index=45&type=chunk)[46](index=46&type=chunk) - Public Shares with redemption features are classified as temporary equity outside of the shareholders' deficit, in accordance with ASC 480-10-S99[64](index=64&type=chunk) [Note 5: Related Party Transactions](index=21&type=section&id=Note%205.%20RELATED%20PARTY%20TRANSACTIONS) - The Sponsor initially purchased 7,187,500 Founder Shares (Class B Ordinary Shares) for a capital contribution of **$25,000**. After a share capitalization, the Sponsor holds 7,906,250 Founder Shares[72](index=72&type=chunk) - The company entered into an Administrative Services Agreement with the Sponsor's affiliate for office space and administrative support at a cost of **$10,000 per month**[78](index=78&type=chunk) - The Sponsor had provided a non-interest bearing loan of up to **$300,000** for IPO expenses, of which **$239,487** was borrowed and fully repaid at the IPO closing[77](index=77&type=chunk) - The Sponsor or its affiliates may provide up to **$1.5 million** in Working Capital Loans, which can be converted into units at **$10.00 per unit** post-business combination. No such loans were outstanding as of June 30, 2025[80](index=80&type=chunk) [Note 6: Commitments](index=24&type=section&id=Note%206.%20COMMITMENTS) - The underwriters are entitled to a deferred underwriting discount of **3.5%** of the gross IPO proceeds, amounting to **$8,855,000**, payable upon completion of an initial business combination[85](index=85&type=chunk) - Holders of Founder Shares and Private Placement Units have registration rights, including up to three demand registrations and piggyback registration rights[83](index=83&type=chunk) [Note 10: Subsequent Events](index=29&type=section&id=Note%2010.%20SUBSEQUENT%20EVENTS) - On July 8, 2025, the company announced that commencing July 11, 2025, holders of its IPO units could elect to separately trade the included Class A Ordinary Shares (OYSE) and Share Rights (OYSER)[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company is a pre-business combination SPAC with no revenue-generating operations. For the six months ended June 30, 2025, it reported a net income of $818,253, primarily from interest on its Trust Account. Liquidity is strong, with $253.97 million in the Trust Account and $1.08 million in cash for operational needs. The company's primary activities involve identifying a suitable business combination target. Management confirms that current funds are sufficient for operating the business, but additional financing might be needed for a business combination - The company is a blank check company incorporated on October 9, 2024, with its activities to date limited to organizational tasks, the IPO, and searching for a business combination target[109](index=109&type=chunk)[112](index=112&type=chunk) Results of Operations (For the periods ended June 30, 2025) | Period | Net Income | Key Components | | :--- | :--- | :--- | | **Three Months** | $843,353 | $970,067 interest income offset by $126,714 operating costs | | **Six Months** | $818,253 | $970,067 interest income offset by $151,814 operating costs | - As of June 30, 2025, the company had **$1,075,364** in cash held outside the Trust Account for working capital and **$253,970,067** in marketable securities held in the Trust Account[119](index=119&type=chunk)[121](index=121&type=chunk) - The company has no off-balance sheet arrangements. Contractual obligations include a **$10,000 monthly fee** for administrative services and a deferred underwriting fee of **$8,855,000** payable upon business combination[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20Regarding%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide the information for this item - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required under this Item[133](index=133&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures as of June 30, 2025. They concluded that these controls were effective at a reasonable assurance level, ensuring that information required for SEC reports is recorded, processed, and reported in a timely manner - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[135](index=135&type=chunk) Part II. Other Information [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there is no material litigation currently pending or contemplated against the company, its officers, or directors - To the knowledge of management, there is no material litigation currently pending or contemplated against the company or its officers and directors[140](index=140&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the registrant is not required to include risk factors in its Form 10-Q. The company refers to the 'Risk Factors' section of its IPO Registration Statement for relevant risk disclosures - As a smaller reporting company, risk factors are not required in this report. For relevant risks, the company refers to its IPO Registration Statement[141](index=141&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On May 23, 2025, the company completed its IPO, raising $253 million in gross proceeds. Concurrently, it sold 708,000 Private Placement Units in an unregistered sale, generating an additional $7.08 million. Of the total gross proceeds, $253 million was placed into the trust account. Total offering costs amounted to $14.53 million, including a deferred underwriting fee of $8.86 million - On May 23, 2025, the company consummated its IPO of 25,300,000 Units at **$10.00 per unit**, generating gross proceeds of **$253,000,000**[142](index=142&type=chunk) - Simultaneously, the company sold 708,000 Private Placement Units at **$10.00 per unit** to its Sponsor and BTIG, LLC, raising gross proceeds of **$7,080,000** through an unregistered sale exempt under Section 4(a)(2) of the Securities Act[143](index=143&type=chunk) - Total offering costs were **$14,529,940**, comprising a **$5,060,000** cash underwriting fee, an **$8,855,000** deferred underwriting fee, and **$614,940** of other costs[145](index=145&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) The company states that during the quarterly period ended June 30, 2025, none of its directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the quarter ended June 30, 2025, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[149](index=149&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report, including the Underwriting Agreement, Amended and Restated Memorandum and Articles of Association, and various other agreements and certifications - The report includes a list of exhibits filed, such as the Underwriting Agreement, Registration Rights Agreement, and officer certifications[153](index=153&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Rayonier Inc. and Rayonier, L.P., highlighting the significant gain from the sale of New Zealand operations and its impact on financial position [Rayonier Inc. Financial Statements](index=5&type=section&id=Rayonier%20Inc.%20Financial%20Statements) Rayonier Inc.'s Q2 2025 performance was significantly boosted by a **$404.5 million** gain from the New Zealand operations sale, leading to strong net income and a strengthened balance sheet Rayonier Inc. Consolidated Statement of Income Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Sales | $106,538 | $99,639 | +6.9% | | Operating Income | $14,545 | $4,547 | +219.9% | | Gain on sale of discontinued operations | $404,463 | $0 | N/A | | Net Income Attributable to Rayonier Inc. | $408,708 | $1,903 | +21,377.0% | | Diluted EPS | $2.63 | $0.01 | +26,200.0% | Rayonier Inc. Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $892,256 | $303,065 | +194.4% | | Total Assets | $3,514,250 | $3,474,419 | +1.1% | | Total Long-Term Debt, Net | $844,905 | $1,044,410 | -19.1% | | Total Shareholders' Equity | $2,302,217 | $1,780,533 | +29.3% | Rayonier Inc. Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $88,687 | $107,627 | -17.6% | | Net cash provided by (used for) investing activities | $658,265 | ($47,445) | N/A | | Net cash used for financing activities | ($198,609) | ($125,078) | +58.8% | - The significant increase in cash from investing activities was driven by **$687.6 million** in net proceeds from the sale of discontinued operations (the New Zealand joint venture)[27](index=27&type=chunk) [Rayonier, L.P. Financial Statements](index=12&type=section&id=Rayonier%2C%20L.P.%20Financial%20Statements) Rayonier, L.P.'s financial statements largely mirror Rayonier Inc.'s due to consolidation, reflecting the same operational results and the significant gain from the New Zealand divestiture, with differences primarily in capital structure - The Operating Partnership's Consolidated Statements of Income and Cash Flows are substantively identical to Rayonier Inc.'s, as Rayonier Inc. operates as an UPREIT and consolidates Rayonier, L.P. for financial reporting[10](index=10&type=chunk)[35](index=35&type=chunk)[45](index=45&type=chunk) Rayonier, L.P. Net Income Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Sales | $106,538 | $99,639 | | Operating Income | $14,545 | $4,547 | | Net Income | $413,607 | $3,035 | | Net Income Attributable to Rayonier, L.P. Unitholders | $414,184 | $1,929 | Rayonier, L.P. Capital Structure (as of June 30, 2025) | Capital Component | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Redeemable Operating Partnership Units | $53,353 | $51,843 | | General partners' capital | $22,690 | $17,772 | | Limited partners' capital | $2,246,297 | $1,759,405 | | Total Capital | $2,302,217 | $1,780,533 | [Notes to Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the **$698.6 million** New Zealand operations sale, segment performance with strong Real Estate offsetting Southern Timber weakness, debt compliance, and interest rate swap usage - On June 30, 2025, the company completed the sale of its 77% interest in its New Zealand operations for a purchase price of **$710 million**, receiving net proceeds of **$698.6 million** and recognizing a gain of **$404.5 million**. These operations are now reported as discontinued[56](index=56&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) Segment Adjusted EBITDA (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Southern Timber | $55,433 | $78,652 | -29.5% | | Pacific Northwest Timber | $13,304 | $10,637 | +25.1% | | Real Estate | $20,576 | $9,090 | +126.3% | | Trading | ($560) | $28 | N/A | | **Total Adjusted EBITDA** | **$71,946** | **$77,971** | **-7.7%** | Total Principal Debt Outstanding (as of June 30, 2025) | Debt Instrument | Principal Amount (in thousands) | | :--- | :--- | | Senior Notes due 2031 (2.75%) | $450,000 | | 2015 Term Loan (Variable) | $200,000 | | 2016 Incremental Term Loan (Variable) | $200,000 | | 2021 Incremental Term Loan (Variable) | $200,000 | | **Total Principal Debt** | **$1,050,000** | - The company uses interest rate swaps with a notional amount of **$600 million** to hedge its exposure on its variable-rate term loans, effectively converting them to fixed-rate obligations[132](index=132&type=chunk)[137](index=137&type=chunk) - The company repurchased approximately **1.5 million** common shares for **$34.9 million** during the second quarter of 2025[258](index=258&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=56&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights the **$404.4 million** gain from the New Zealand sale, improved liquidity, strong Real Estate performance offsetting Southern Timber weakness, and an optimistic outlook for timber and real estate markets [Consolidated Results and Segment Performance](index=61&type=section&id=Consolidated%20Results%20and%20Segment%20Performance) Consolidated net income surged due to the **$404.4 million** New Zealand sale gain, with Real Estate driving Adjusted EBITDA growth from continuing operations, offsetting Southern Timber's decline - Southern Timber performance declined in Q2 2025, with a **5% decrease** in harvest volume and a **14% drop** in weighted-average net stumpage realizations, driven by softer mill demand and competing supply from salvage timber[238](index=238&type=chunk) - Pacific Northwest Timber operating income improved to **$1.6 million** from a loss of **$1.5 million** in the prior year, benefiting from a **6% increase** in domestic sawtimber prices and better cost management, despite a **15% volume decrease**[240](index=240&type=chunk) - The Real Estate segment had a strong quarter, with sales increasing to **$29.4 million** from **$15.5 million** YoY. This was driven by significant Improved Development sales in the Heartwood and Wildlight projects and a large Unimproved Development sale in Florida[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - The company recognized a **$404.4 million** gain on the sale of its New Zealand joint venture, which is reported under discontinued operations[256](index=256&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly strengthened to **$892.3 million** cash due to the New Zealand asset sale, improving the debt-to-capital ratio to **31%**, with sufficient funding for the next 12 months Key Liquidity Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $892.3 million | $303.1 million | | Total debt (principal) | $1,050.0 million | $1,050.0 million | | Debt to capital ratio | 31% | 36% | | Net debt to enterprise value | 4% | 16% | - Cash provided by investing activities for the first six months of 2025 was **$658.3 million**, mainly due to **$687.6 million** in net proceeds from the sale of the New Zealand joint venture[268](index=268&type=chunk) - During Q2 2025, the company repurchased **1.5 million** shares for **$34.9 million**. Year-to-date, repurchases totaled **1.6 million** shares for **$37.6 million**[258](index=258&type=chunk)[259](index=259&type=chunk) - The company expects 2025 capital expenditures to be between **$52 million** and **$56 million**, and real estate development investments to be between **$23 million** and **$27 million**[275](index=275&type=chunk)[276](index=276&type=chunk) [Outlook](index=72&type=section&id=Outlook) Management anticipates improved second-half 2025 performance, with modestly higher harvest volumes and prices in Southern and Pacific Northwest Timber, and significant Real Estate closing activity - Southern Timber: Expects materially higher volumes and modestly higher pine net stumpage realizations in the second half of 2025 compared to the first half[260](index=260&type=chunk) - Pacific Northwest Timber: Expects weighted-average log pricing to be modestly higher in the second half of the year[261](index=261&type=chunk) - Real Estate: Remains encouraged by the transaction pipeline and expects significant closing activity over the balance of the year[261](index=261&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk on its **$600 million** variable-rate debt via swaps, effectively converting it to fixed-rate, and discloses fair value sensitivity of its **$450 million** fixed-rate debt - The company has **$600 million** of variable-rate debt, which is fully hedged by an equal notional amount of interest rate swaps, mitigating exposure to interest rate fluctuations[298](index=298&type=chunk)[299](index=299&type=chunk) - A hypothetical one-percentage point increase or decrease in interest rates would result in no change to interest payments on the company's variable-rate debt over a 12-month period due to the hedges in place[299](index=299&type=chunk) - The fair value of the company's **$450 million** of fixed-rate debt was estimated at **$398.3 million** as of June 30, 2025. A hypothetical **1% increase** in interest rates would decrease its fair value by approximately **$20 million**[300](index=300&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures for both Rayonier Inc. and Rayonier, L.P. were effective as of June 30, 2025, with no material changes in internal control - For both Rayonier Inc. and Rayonier, L.P., management concluded that disclosure controls and procedures were effective as of June 30, 2025[306](index=306&type=chunk)[310](index=310&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[307](index=307&type=chunk)[311](index=311&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and claims arising in the normal course of business, none of which are expected to have a material adverse effect on its financial position - The company is a defendant in various lawsuits and claims arising in the normal course of business, which are not expected to have a material adverse effect on its financial position, results of operations, or cash flow[149](index=149&type=chunk)[312](index=312&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Rayonier repurchased **1.5 million** common shares for **$34.9 million** in Q2 2025, with **$262.4 million** remaining under its share repurchase program, and issued shares for Operating Partnership units Q2 2025 Share Repurchases | Metric | Value | | :--- | :--- | | Total Shares Purchased (Public Program) | 1,472,928 | | Average Price Paid per Share | ~$23.71 | | Total Cost | ~$34.9 million | | Remaining Authorization (as of June 30, 2025) | $262.4 million | - The company issued **9,519** common shares in exchange for an equal number of Operating Partnership units during the quarter[313](index=313&type=chunk) [Other Information](index=83&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[319](index=319&type=chunk) [Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications for both entities and financial statements in iXBRL format - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer for both Rayonier Inc. and Rayonier, L.P. (Exhibits 31.1, 31.2, 31.3, 31.4, 32.1, 32.2)[320](index=320&type=chunk) - Financial statements and notes are filed in Inline Extensible Business Reporting Language (iXBRL) format (Exhibit 101)[320](index=320&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the quarter ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $36.1 million while the stockholders' deficit improved to $(1.3) million as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,006 | $5,343 | | Total current assets | $27,123 | $32,165 | | **Total assets** | **$36,078** | **$39,739** | | Total current liabilities | $35,662 | $43,740 | | **Total liabilities** | **$37,412** | **$45,439** | | **Total stockholders' equity (deficit)** | **$(1,334)** | **$(5,700)** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a Q2 net loss of $7.5 million, while the H1 net loss narrowed to $7.0 million from the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $11,190 | $11,516 | $27,911 | $28,292 | | Gross profit | $845 | $2,969 | $9,201 | $5,871 | | Loss from operations | $(6,732) | $(6,470) | $(6,087) | $(9,159) | | **Net loss** | **$(7,475)** | **$(6,616)** | **$(7,017)** | **$(9,522)** | | **Net loss per share (basic & diluted)** | **$(0.79)** | **$(1.41)** | **$(0.91)** | **$(2.09)** | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) The stockholders' deficit improved significantly due to capital raising activities offsetting the period's net loss - For the six months ended June 30, 2025, the company's stockholders' deficit decreased from **$(5,700) thousand to $(1,334) thousand**[21](index=21&type=chunk) - Key drivers were **$8,952 thousand in net proceeds from common stock issuance** and **$2,431 thousand in stock-based compensation**, partially offset by a **$7,017 thousand net loss**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $14.5 million, funded by $11.2 million from financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,488) | $(3,560) | | Net cash used in investing activities | $0 | $(69) | | Net cash provided by financing activities | $11,151 | $3,832 | | **Net decrease in cash** | **$(3,337)** | **$203** | | **Cash at end of period** | **$2,006** | **$9,600** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the pending asset sale to Social Mobile, a planned RTO, and significant revenue recognition items - On July 17, 2025, the Company entered into an Asset Purchase Agreement to sell substantially all assets to Social Mobile for **$15 million in cash** plus a potential **$5 million earn-out**[30](index=30&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company is pursuing a potential **reverse takeover (RTO) transaction** in conjunction with the asset sale to maximize stockholder value[31](index=31&type=chunk)[116](index=116&type=chunk) - Management believes it has **sufficient liquidity to continue as a going concern** for the next twelve months based on current and subsequent funding[36](index=36&type=chunk) - For H1 2025, the Company recognized **$5.49 million in revenue** from the release of previously accrued customer allowances[51](index=51&type=chunk) - Subsequent to quarter end, the company raised **$4.8 million from a public offering** and **$2.5 million from a promissory note**[121](index=121&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, the pending asset sale, and liquidity for the reporting period [Company Overview and Strategic Initiatives](index=31&type=section&id=Company%20Overview%20and%20Strategic%20Initiatives) The company is focused on rugged 5G solutions and is pursuing a sale of its core business to Social Mobile - The company launched new products including the **Sonim H500 hotspot**, **XP Pro 5G smartphone**, and **XP3plus 5G flip phone**[141](index=141&type=chunk)[144](index=144&type=chunk) - Sonim entered an agreement to sell substantially all assets for **$15 million in cash** plus a potential **$5 million earn-out**[149](index=149&type=chunk)[150](index=150&type=chunk) - In parallel with the asset sale, the company is pursuing a **reverse merger (RTO)** to allow the public entity to continue with a new business[152](index=152&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) H1 2025 gross profit improved significantly due to a large customer allowance release, despite a slight revenue dip Comparison of Results of Operations (in thousands) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total net revenues | $27,911 | $28,292 | (1)% | | Gross profit | $9,201 | $5,871 | 57% | | Loss from operations | $(6,087) | $(9,159) | (34)% | | Net loss | $(7,017) | $(9,522) | (26)% | - H1 2025 gross profit increased by $3.3 million, primarily due to a **$5.5 million revenue recognition** from expired customer allowance agreements[177](index=177&type=chunk) - Q2 2025 gross profit decreased by $2.1 million, impacted by a **$1.1 million impairment of contract fulfillment assets** and tariff costs[175](index=175&type=chunk) - R&D expenses for H1 2025 increased by **$1.5 million YoY** due to new product development[179](index=179&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Recent financing activities provide sufficient capital to fund operations for at least the next twelve months - As of June 30, 2025, the company had **$2.0 million in cash and cash equivalents**[184](index=184&type=chunk) - Subsequent to the quarter end, the company raised net proceeds of approximately **$4.8 million from a public offering** and **$2.3 million from a promissory note**[184](index=184&type=chunk) - The company has access to a domestic receivables financing facility of up to **$2.5 million** and an international facility of up to **€3.0 million**[184](index=184&type=chunk) - Management expects existing cash and subsequent funding to be **sufficient to meet all obligations for at least one year** from the report's release date[184](index=184&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Sonim is not required to provide information regarding market risk - The company is a **smaller reporting company** as defined by Rule 12b-2 of the Exchange Act and is not required to provide this information[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[195](index=195&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the quarter[197](index=197&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) A complaint filed by AJP Holding Company and Orbic North America in April 2025 was dismissed in June 2025 - A complaint filed by AJP Holding Company, LLC and Orbic North America, LLC on April 24, 2025, was **dismissed without prejudice on June 2, 2025**[98](index=98&type=chunk)[101](index=101&type=chunk)[199](index=199&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section adds new risks related to the proposed asset sale and RTO initiative and updates existing risk factors - A new group of risk factors, **"Risks Related to the Proposed Asset Purchase Agreement and Announced Strategic Initiatives,"** has been added[217](index=217&type=chunk) - Key new risks include potential failure to close the asset sale, business disruptions, and the risk of becoming a **'shell company'** if an RTO is not completed[217](index=217&type=chunk)[219](index=219&type=chunk)[223](index=223&type=chunk) - The U.S. trade policy risk was updated to note the imposition of a **145% tariff on imports from China**, though an exemption exists for smartphones[202](index=202&type=chunk) - The stockholder activism risk was amended to mention the recent campaign by **Orbic North America** to acquire Sonim[206](index=206&type-chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the reporting period - None[230](index=230&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[231](index=231&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business operations - Not applicable[232](index=232&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No directors or officers adopted or terminated a **Rule 10b5-1 trading arrangement** during the quarter[233](index=233&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including the Asset Purchase Agreement and financing documents - Exhibit 2.1 is the **Asset Purchase Agreement** dated July 17, 2025[235](index=235&type=chunk) - Exhibits include various financing and corporate governance documents, such as a **promissory note (4.1)**, a **Rights Agreement (4.2)**, and **officer certifications (31.1, 31.2, 32.1, 32.2)**[235](index=235&type=chunk)[237](index=237&type=chunk)

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=9&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements and accompanying notes for the period ended June 30, 2025 [Condensed Consolidated Financial Statements](index=9&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Total assets grew to $27.3 billion, with Q2 2025 revenues reaching $1.35 billion and net income of $111.8 million Condensed Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$27,264,941** | **$24,884,308** | | Goodwill | $3,436,192 | $1,162,636 | | Intangible assets, net | $2,220,065 | $975,828 | | **Total Liabilities** | **$18,425,558** | **$17,485,922** | | Debt obligations | $3,675,154 | $2,558,914 | | **Total Equity** | **$8,257,198** | **$6,824,190** | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1,350,128** | **$788,682** | **$2,438,933** | **$1,496,045** | | Management fees | $900,622 | $721,681 | $1,717,609 | $1,409,373 | | Carried interest allocation | $323,901 | $(51,167) | $483,909 | $(83,645) | | **Total Expenses** | **$1,137,578** | **$564,544** | **$2,151,906** | **$1,103,037** | | **Net Income** | **$225,980** | **$276,251** | **$349,481** | **$480,066** | | Net income attributable to common stockholders | $111,750 | $94,938 | $133,607 | $167,965 | | **Diluted EPS** | **$0.46** | **$0.43** | **$0.48** | **$0.76** | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,409,904 | $1,142,217 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(1,744,928) | $(1,125,531) | | **Net change in cash and cash equivalents** | **$(998,320)** | **$(63,829)** | [Notes to the Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the $3.9 billion GCP acquisition, an upsized credit facility, and subsequent dividend declarations - On March 1, 2025, the Company completed the acquisition of GCP International for a total consideration of **$3.9 billion**, consisting of **$1.79 billion in cash**, **$1.66 billion in equity**, and **$465 million in contingent consideration**[49](index=49&type=chunk)[50](index=50&type=chunk) GCP Acquisition Purchase Price Allocation (in thousands) | Assets Acquired / Liabilities Assumed | Fair Value | | :--- | :--- | | Total identifiable assets acquired | $1,844,322 | | Accounts payable, accrued expenses and other liabilities | $203,969 | | **Net identifiable assets acquired** | **$1,640,353** | | **Goodwill** | **$2,270,422** | | **Net assets acquired** | **$3,910,775** | - In April 2025, the company amended its revolving Credit Facility, extending the maturity to April 2030 and increasing commitments to **$1.84 billion** from $1.40 billion[93](index=93&type=chunk) - The company has contingent liabilities related to the GCP acquisition, including an earnout for the data center business (up to **$1.0 billion**) and the Japan business (up to **$0.5 billion**)[112](index=112&type=chunk) - Subsequent to the quarter end, in July 2025, the board declared a quarterly dividend of **$1.12 per share** for Class A and non-voting common stock and **$0.84375 per share** for Series B preferred stock[207](index=207&type=chunk)[208](index=208&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 performance, the GCP acquisition's impact, AUM growth, and segment results [Trends Affecting Our Business](index=56&type=section&id=Trends%20Affecting%20Our%20Business) Global markets performed well in Q2 2025 despite volatility, with the company's portfolio well-positioned - Global equity and debt markets experienced volatility but largely performed well during Q2 2025, supported by positive trade developments and resilient macroeconomic indicators[213](index=213&type=chunk) - Commercial real estate markets showed mixed performance; European markets began to recover due to interest rate cuts, while U.S. markets saw a slight decline[214](index=214&type=chunk)[215](index=215&type=chunk) - Private equity transaction volume slowed during the quarter due to macroeconomic and global trade uncertainty, leading to a heightened focus on disciplined underwriting[216](index=216&type=chunk) - As of June 30, 2025, approximately **85% of the company's debt assets** and **52% of its total assets** were floating rate instruments, positioning the portfolio for a fluctuating interest rate environment[217](index=217&type=chunk) [Managing Business Performance](index=57&type=section&id=Managing%20Business%20Performance) Key operating metrics show significant growth, with total AUM reaching $572.4 billion and FPAUM at $349.6 billion AUM and FPAUM Growth (in billions) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total AUM | $572.4 | $447.2 | | Fee Paying AUM (FPAUM) | $349.6 | $275.8 | - As of June 30, 2025, AUM not yet paying fees was **$86.8 billion**, which could generate approximately **$822.7 million** in potential incremental annual management fees[238](index=238&type=chunk) - Incentive Eligible AUM (IEAUM) was **$421.9 billion** and Incentive Generating AUM (IGAUM) was **$229.9 billion** as of June 30, 2025[240](index=240&type=chunk) [Consolidated Results of Operations](index=67&type=section&id=Consolidated%20Results%20of%20Operations) Q2 2025 revenues grew 71% to $1.35 billion, while expenses rose 102%, driven by the GCP acquisition Consolidated Revenue Breakdown (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Management fees | $900,622 | $721,681 | 25% | | Carried interest allocation | $323,901 | $(51,167) | NM | | Administrative, transaction and other fees | $91,563 | $40,973 | 123% | | **Total revenues** | **$1,350,128** | **$788,682** | **71%** | Consolidated Expense Breakdown (in thousands) | Expense Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $643,709 | $419,858 | 53% | | Performance related compensation | $234,706 | $(28,985) | NM | | General, administrative and other expenses | $232,156 | $169,432 | 37% | | **Total expenses** | **$1,137,578** | **$564,544** | **102%** | - The increase in Compensation and Benefits for Q2 2025 was significantly impacted by the GCP acquisition, which included **$40.8 million in equity-based compensation** and **$20.8 million in other cash compensation costs**[279](index=279&type=chunk) - The increase in General, Administrative and Other Expenses was also driven by the GCP acquisition, which contributed **$54.7 million** in Q2 2025[285](index=285&type=chunk) [Segment Analysis](index=76&type=section&id=Segment%20Analysis) Segment performance varied, with strong FRE growth in Real Assets and Credit, leading to a 26% overall FRE increase Fee Related Earnings (FRE) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $426,310 | $368,281 | 16% | | Real Assets Group | $113,645 | $51,643 | 120% | | Private Equity Group | $9,846 | $14,454 | (32)% | | Secondaries Group | $50,537 | $33,641 | 50% | | **Total FRE** | **$409,111** | **$324,516** | **26%** | Realized Income (RI) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $435,494 | $408,205 | 7% | | Real Assets Group | $97,648 | $41,069 | 138% | | Private Equity Group | $12,858 | $11,392 | 13% | | Secondaries Group | $48,715 | $26,544 | 84% | | **Total RI** | **$397,814** | **$363,158** | **10%** | [Liquidity and Capital Resources](index=109&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sufficient with $509.7 million in cash and $725.0 million available under the credit facility - As of June 30, 2025, the company had **$509.7 million in cash** and cash equivalents and **$725.0 million available** under its Credit Facility, with management believing these sources are sufficient[432](index=432&type=chunk) Company Cash Flow Summary (in thousands) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,164,527 | $879,653 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(173,078) | $(878,127) | - The Tax Receivable Agreement (TRA) liability balance was **$508.6 million** as of June 30, 2025, with payments of **$8.1 million** for the first six months of 2025[453](index=453&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=113&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk exposures are reported for the six months ended June 30, 2025 - There have been **no material changes** in the company's market risks for the six months ended June 30, 2025[458](index=458&type=chunk)[459](index=459&type=chunk) [Item 4. Controls and Procedures](index=113&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were **effective at a reasonable assurance level**[461](index=461&type=chunk) - There were **no changes in internal control** over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[462](index=462&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any legal proceedings expected to have a material adverse effect - The company and its affiliates are subject to legal proceedings and regulatory investigations from time to time, but management does not expect any current matters to have a **material impact** on its financial results[463](index=463&type=chunk) [Item 1A. Risk Factors](index=114&type=section&id=Item%201A.%20Risk%20Factors) The report refers to the risk factors detailed in the company's 2024 Annual Report on Form 10-K - The report directs investors to the risk factors detailed in the company's **Annual Report on Form 10-K for the year ended December 31, 2024**, for a comprehensive understanding of potential risks[464](index=464&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=114&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were conducted during the reporting period - **No unregistered sales of equity securities** occurred during the period covered by this report[465](index=465&type=chunk) [Item 5. Other Information](index=115&type=section&id=Item%205.%20Other%20Information) Certain executives and directors entered into Rule 10b5-1 trading plans during the second quarter of 2025 Rule 10b5-1 Trading Plans Adopted in Q2 2025 | Name and Title | Plan Date | Maximum Shares That May Be Sold | Plan Expiration Date | | :--- | :--- | :--- | :--- | | Antony Ressler, Executive Chairman & Co-Founder | May 21, 2025 | 2,000,000 | February 13, 2026 | | Naseem Sagati Aghili, General Counsel and Corporate Secretary | June 11, 2025 | 42,000 plus shares from vested RSUs | March 1, 2026 | [Item 6. Exhibits](index=116&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreement amendments and certifications - Key exhibits filed with this report include **Amendment No. 13 to the Credit Agreement**, the Sixth Amended and Restated Exchange Agreement, and the Sixth Amended and Restated Limited Partnership Agreement of Ares Holdings L.P[475](index=475&type=chunk)

[Q2 2025 Financial & Business Highlights](index=1&type=section&id=Q2%202025%20Financial%20%26%20Business%20Highlights) Sonim Technologies reported Q2 2025 net revenue of **$11.2 million** and a GAAP net loss of **$7.5 million**, with a strategic asset sale and new product launches Financial Highlights (Q2 2025 vs Q1 2025) | Financial Metric | Q2 2025 | Q1 2025 | Note | | :--- | :--- | :--- | :--- | | Net Revenue | $11.2 million | $16.7 million | Q1 included a one-time $5.3M revenue addition | | GAAP Net Income (Loss) | ($7.5 million) | $0.5 million | Q2 includes impairment loss and proxy costs | | Adjusted EBITDA* | ($3.2 million) | ($3.2 million) | Unchanged QoQ | | Cash and Cash Equivalents | $2.0 million | - | As of June 30, 2025 | - In July, Sonim entered a definitive agreement for Social Mobile to acquire substantially all of its assets in an all-cash transaction for **$15.0 million**, with up to an additional **$5.0 million** in an earn-out payment The deal is expected to close in Q4 2025, pending stockholder approval[5](index=5&type=chunk) - Key product launches are underway in Q3, including the XP Pro series and a 5G flip phone with tier-one carriers The company also launched the Sonim MegaConnect HPUE mobile hotspot with FirstNet and AT&T[2](index=2&type=chunk) - The company raised **$5.4 million** in net capital through common stock sales to fund product expansion and new launches[3](index=3&type=chunk) [Detailed Financial Performance Analysis](index=3&type=section&id=Detailed%20Financial%20Performance%20Analysis) Q2 2025 revenue decreased to **$11.2 million**, with gross profit at **$0.8 million** and a net loss of **$7.5 million**, impacted by one-time items Key Financial Metrics (Q2 2025 vs Q1 2025) | Metric | Q2 2025 | Q1 2025 | Key Factors | | :--- | :--- | :--- | :--- | | Net Revenue | $11.2M | $16.7M | Q1 included a $5.3M one-time revenue item | | Gross Profit | $0.8M | $8.4M | Q2 included a $1.1M impairment loss | | Net Income (Loss) | ($7.5M) | $0.5M | Q1 benefited from the $5.3M one-time item | - Operating expenses were stable at **$7.6 million**, as a **$0.7 million** decrease in R&D costs was offset by higher G&A and Sales & Marketing expenses due to legal fees from the contested proxy[8](index=8&type=chunk) - The company ended Q2 with **$2.0 million** in cash, **$2.9 million** in accounts receivable, and **$9.9 million** in inventory Subsequent to the quarter's end, it received net proceeds of **$7.1 million** from stock sales and debt issuance[10](index=10&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents unaudited condensed consolidated financial statements as of June 30, 2025, detailing total assets of **$36.1 million** and a Q2 net loss of **$7.5 million** [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Sonim reported **$2.0 million** in cash, **$27.1 million** in current assets, **$35.7 million** in current liabilities, and a **$1.3 million** stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Items (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,006 | $5,343 | | Inventory | $9,889 | $10,621 | | Total current assets | $27,123 | $32,165 | | Total assets | $36,078 | $39,739 | | **Liabilities & Equity** | | | | Accounts payable | $20,583 | $22,848 | | Total current liabilities | $35,662 | $43,740 | | Total liabilities | $37,412 | $45,439 | | Total stockholders' equity (deficit) | ($1,334) | ($5,700) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, Sonim's net revenues were **$11.2 million**, gross profit **$0.8 million**, and net loss **$7.5 million** or **($0.79)** per basic share Condensed Consolidated Statements of Operations (in thousands) | Statement of Operations (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total net revenues | $11,190 | $11,516 | | Gross profit | $845 | $2,969 | | Total operating expenses | $7,577 | $9,439 | | Income (loss) from operations | ($6,732) | ($6,470) | | Net income (loss) | ($7,475) | ($6,616) | | Net income (loss) per share, basic | ($0.79) | ($1.41) | [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) Sonim provides Adjusted EBITDA as a supplemental non-GAAP measure, reporting a Q2 2025 loss of **$3.2 million**, consistent with Q1, after various adjustments - Adjusted EBITDA is defined as net loss excluding stock-based compensation, depreciation & amortization, interest, taxes, customer allowance agreement expirations, asset impairments, financing costs, and non-recurring legal fees[25](index=25&type=chunk) Reconciliation to Adjusted EBITDA (in thousands) | Reconciliation to Adjusted EBITDA (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | | Net income (loss) | $(7,475) | $458 | | Adjustments: | | | | Release of customer allowance liabilities | $(219) | $(5,271) | | Impairment of contract fulfillment assets | $1,084 | — | | Non-recurring legal and professional fees | $613 | — | | Other standard adjustments | $2,845 | $1,478 | | **Adjusted EBITDA** | **$(3,151)** | **$(3,245)** | [Corporate Information & Forward-Looking Statements](index=3&type=section&id=Corporate%20Information%20%26%20Forward-Looking%20Statements) This section outlines Sonim's business, forward-looking statements, and details regarding the proposed asset sale to Social Mobile, emphasizing associated risks and stockholder information - The company plans to file a proxy statement with the SEC concerning the proposed asset sale to Social Mobile and urges stockholders to read it before making any voting decisions[15](index=15&type=chunk) - Forward-looking statements involve significant risks, including the ability to obtain stockholder approval for the asset sale, the timing of the closing, the potential for competing offers, and the impact of the announcement on business relationships[14](index=14&type=chunk) - Sonim's directors and executive officers may be deemed participants in the solicitation of proxies for the proposed transaction[16](index=16&type=chunk)

PART I: FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for June 30, 2025, show increased assets and liabilities, decreased equity, and improved operational performance with revenue growth and a narrowed net loss [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$33.9 million**, liabilities to **$26.6 million** due to a new term loan, while stockholders' equity decreased to **$7.3 million** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$33,900** | **$29,766** | | Cash and cash equivalents | $6,869 | $5,651 | | Intangible assets, net | $11,929 | $10,276 | | **Total Liabilities** | **$26,551** | **$20,330** | | Term loan, net | $12,765 | $6,820 | | Deferred revenue | $8,229 | $7,518 | | **Total Stockholders' Equity** | **$7,349** | **$9,436** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2025 revenue grew **16%** to **$9.9 million**, achieving operating income of **$242,000** and a near breakeven net loss of **($2,000)**, significantly improving from Q2 2024 Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $9,857 | $8,470 | +16.4% | | Gross Profit | $7,619 | $6,706 | +13.6% | | Operating Income (Loss) | $242 | $(497) | +148.7% | | Net Loss | $(2) | $(735) | +99.7% | | Net Loss Per Share | $0.00 | $(0.06) | +100.0% | H1 2025 vs H1 2024 Performance (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $19,590 | $16,553 | +18.3% | | Gross Profit | $15,357 | $13,028 | +17.9% | | Operating Loss | $(698) | $(1,128) | +38.1% | | Net Loss | $(1,471) | $(1,564) | +6.0% | | Net Loss Per Share | $(0.12) | $(0.13) | +7.7% | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For H1 2025, operating cash flow increased to **$1.2 million**, investing cash use rose to **$2.7 million** due to acquisitions, and financing cash flow reversed to a **$2.7 million** inflow from new debt Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,171 | $613 | | Net cash used in investing activities | $(2,671) | $(1,035) | | Net cash provided by (used in) financing activities | $2,718 | $(3,728) | | **Net increase (decrease) in cash** | **$1,218** | **$(4,150)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail revenue streams, Q2 2025 asset acquisition, a new **$20 million** credit facility replacing prior debt, and the initiation of a share repurchase program - Revenue is disaggregated into two sales channels: Partner and Marketplace, and Enterprise. For the six months ended June 30, 2025, Enterprise revenue grew **27%** YoY, while Partner and Marketplace revenue grew **13%** YoY[30](index=30&type=chunk)[123](index=123&type=chunk) - One customer accounted for approximately **14%** of total revenue in the first six months of 2025 and **11%** of total accounts receivable as of June 30, 2025[32](index=32&type=chunk)[35](index=35&type=chunk) - In Q2 2025, the company completed an asset acquisition, recognizing **$1.8 million** in customer relationships, which will be amortized over 8 years[76](index=76&type=chunk) - On March 31, 2025, the company entered a new credit facility with Western Alliance Bank for up to **$20.0 million** and used proceeds to repay its previous **$7.0 million** term loan with SG Credit Partners, recognizing a **$300,000** loss on extinguishment of debt[87](index=87&type=chunk)[97](index=97&type=chunk) - In January 2025, the Board authorized a share repurchase program of up to **$12.5 million**. As of June 30, 2025, the company had repurchased shares for **$1.76 million**, with **$10.74 million** remaining[57](index=57&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **18%** H1 2025 revenue growth, **14%** ARR increase to **$38.2 million**, rising operating expenses due to litigation, and improved liquidity from a new credit facility [Executive Overview and Key Metrics](index=30&type=section&id=Executive%20Overview%20and%20Key%20Metrics) The company achieved **18%** H1 2025 revenue growth, with ARR increasing **14%** to **$38.2 million**, despite a **1%** customer count decrease due to contract renegotiation - Annual Recurring Revenue (ARR) was approximately **$38.2 million** as of June 30, 2025, a **14%** increase year-over-year[112](index=112&type=chunk)[142](index=142&type=chunk) - The customer count decreased by **1%** to approximately **120,000** from June 30, 2024, due to a contract renegotiation within the Partner and Marketplace channel[113](index=113&type=chunk) - For the six months ended June 30, 2025, the Partner and Marketplace channel revenue grew **13%** and the Enterprise channel revenue grew **27%** over the prior year period[114](index=114&type=chunk) [Results of Operations Analysis](index=32&type=section&id=Results%20of%20Operations%20Analysis) H1 2025 revenue grew **18%** to **$19.6 million**, with gross profit matching; operating expenses rose **13%** due to increased selling, marketing, and G&A costs, partially offset by a **$1.3 million** non-cash gain Revenue by Channel - Six Months Ended June 30 (in thousands) | Channel | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Partner and Marketplace | $10,919 | $9,704 | $1,215 | 13% | | Enterprise | $8,671 | $6,849 | $1,822 | 27% | | **Total revenue** | **$19,590** | **$16,553** | **$3,037** | **18%** | - Selling and marketing expenses for H1 2025 increased by **26%** YoY, primarily due to higher third-party marketing expenses and costs from acquisitions[129](index=129&type=chunk)[130](index=130&type=chunk) - General and administrative expenses for H1 2025 increased by **33%** YoY, mainly due to an **$830,000** increase in litigation expense, higher personnel costs, and amortization[133](index=133&type=chunk)[135](index=135&type=chunk) - A non-cash gain of **$1.31 million** was recognized in H1 2025 due to a reduction in the estimated earnout payable for the ADA Site Compliance acquisition[136](index=136&type=chunk)[137](index=137&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company held **$6.9 million** in cash and **$1.4 million** in working capital, an improvement driven by **$13.4 million** in new term loan advances, ensuring sufficient liquidity for the next twelve months - Working capital increased from **$549,000** at Dec 31, 2024, to **$1,384,000** at June 30, 2025, mainly due to new debt financing[143](index=143&type=chunk) - The company initiated a **$12.5 million** share repurchase program in January 2025 and used **$1.76 million** of it in the first six months of the year[144](index=144&type=chunk) - Cash from financing activities increased significantly due to **$13.4 million** in proceeds from a new term loan, partially offset by the repayment of a **$7.0 million** previous loan[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is indicated as not applicable - Not applicable[152](index=152&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[155](index=155&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2025[156](index=156&type=chunk) PART II: OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to materially adversely affect its financial position or operations - Management believes the resolution of any routine disputes incidental to business operations is not likely to have a material adverse effect on the company[162](index=162&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the 2024 Form 10-K - No material changes to the risk factors set forth in the 2024 Form 10-K have occurred[163](index=163&type=chunk) [Item 2. Issuer Purchases of Equity Securities](index=40&type=section&id=Item%202.%20Issuer%20Purchases%20of%20Equity%20Securities) During Q2 2025, the company repurchased **143,939** shares for approximately **$1.76 million** under its **$12.5 million** share repurchase program Share Repurchases for Q2 2025 | Period | Total Shares Purchased (Program) | Average Price Paid per Share | Approx. Value Remaining ($) | | :--- | :--- | :--- | :--- | | May 1 - May 31 | 123,939 | $12.24 | $10,983,000 | | June 1 - June 30 | 20,000 | $12.38 | $10,735,000 | | **Total Q2** | **143,939** | **$12.26** | **$10,735,000** | [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and documents related to loan modification and board resolutions

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details unaudited financial statements, management's discussion, and related disclosures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Identiv, Inc.'s unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, discontinued operations, revenue recognition, fair value measurements, balance sheet components, income taxes, stockholders' equity, stock-based compensation, net loss per common share, segment reporting, restructuring, leases, and commitments [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased by approximately $9.3 million from December 31, 2024, to June 30, 2025, primarily driven by a reduction in cash and cash equivalents, accounts receivable, and inventories Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $129,339 | $135,646 | $(6,307) | -4.65% | | Accounts receivable, net | $3,466 | $4,214 | $(748) | -17.75% | | Inventories | $6,133 | $7,475 | $(1,342) | -17.95% | | Total current assets | $144,112 | $152,845 | $(8,733) | -5.71% | | Total assets | $153,876 | $163,225 | $(9,349) | -5.73% | | Total current liabilities | $6,642 | $7,960 | $(1,318) | -16.56% | | Total liabilities | $7,461 | $9,156 | $(1,695) | -18.51% | | Total stockholders' equity | $146,415 | $154,069 | $(7,654) | -4.97% | [Condensed Consolidated Statements of Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Identiv reported a net loss of $6.042 million for the three months ended June 30, 2025, and $10.831 million for the six months ended June 30, 2025, representing a decrease in net loss compared to the prior year's three-month period but an increase for the six-month period, primarily due to a significant decline in net revenue and a shift from gross profit to gross loss, partially offset by reduced operating expenses and increased interest income Key Financial Highlights (Continuing Operations) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net revenue | $5,040 | $6,741 | -25.23% | $10,309 | $13,399 | -23.06% | | Gross profit (loss) | $(474) | $614 | -177.20% | $(342) | $1,097 | -131.18% | | Operating expenses | $5,913 | $7,334 | -19.38% | $11,513 | $12,880 | -10.61% | | Loss from continuing operations | $(6,387) | $(6,720) | -4.96% | $(11,855) | $(11,783) | 0.61% | | Net loss | $(6,042) | $(6,216) | -2.79% | $(10,831) | $(10,774) | 0.53% | | Basic & Diluted EPS (Net Loss) | $(0.26) | $(0.27) | -3.70% | $(0.47) | $(0.48) | -2.08% | - Income from discontinued operations, net of tax, was **$0** for the three and six months ended **June 30, 2025**, compared to **$707,000** and **$1,531,000** respectively in **2024**, reflecting the sale of the Physical Security Business in **September 2024**[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from $154.069 million at January 1, 2025, to $146.415 million at June 30, 2025, primarily due to the net loss incurred during the period, partially offset by stock-based compensation and unrealized gains from foreign currency translation adjustments Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Item (in thousands) | Amount | | :------------------ | :----- | | Balance, January 1, 2025 | $154,069 | | Net loss | $(10,831) | | Unrealized gain from foreign currency translation adjustments | $1,828 | | Stock-based compensation | $1,703 | | Shares withheld in payment of taxes | $(354) | | Balance, June 30, 2025 | $146,415 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased significantly to $6.848 million for the six months ended June 30, 2025, compared to $2.294 million in the prior year, mainly due to the net loss and changes in operating assets and liabilities, while cash used in investing activities also increased, and cash used in financing activities decreased due to no borrowings or repayments under the revolving loan facility in 2025 Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity (in thousands) | 2025 | 2024 | | :-------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(6,848) | $(2,294) | | Net cash used in investing activities | $(553) | $(367) | | Net cash used in financing activities | $(354) | $(2,654) | | Effect of exchange rates | $1,448 | $(68) | | Net decrease in cash | $(6,307) | $(5,383) | | Cash, cash equivalents, and restricted cash at end of period | $129,639 | $19,001 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide essential context and detail for the unaudited condensed consolidated financial statements, covering accounting policies, the impact of discontinued operations, revenue recognition practices, fair value measurements, specific balance sheet components, income tax considerations, changes in stockholders' equity, stock-based compensation, net loss per common share calculations, segment reporting, restructuring activities, lease obligations, and contractual commitments [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim information and SEC rules, and include Identiv, Inc. and its wholly-owned subsidiaries, with reclassifications made to 2024 statements for conformity with 2025 presentation, having no impact on net loss, total assets, liabilities, or stockholders' equity, and results for the three and six months ended June 30, 2025, are not indicative of future periods - The company reclassified certain **fiscal 2024** condensed consolidated financial statements to conform with the **fiscal 2025** presentation, which had no impact on net loss, total assets, total liabilities, or stockholders' equity[21](index=21&type=chunk) - The Physical Security Business was sold on **September 6, 2024**, and its results are classified as discontinued operations for **2024** periods[23](index=23&type=chunk) [Note 2. Significant Accounting Policies and Recent Accounting Pronouncements](index=8&type=section&id=Note%202.%20Significant%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) No material changes were made to the company's significant accounting policies, and Identiv is evaluating the impact of recently issued FASB ASUs, including ASU 2023-09 (Income Tax Disclosures, effective 2025), ASU 2024-03 (Disaggregation of Income Statement Expenses, effective 2026/2027), and ASU 2025-05 (Credit Losses for Accounts Receivable, effective 2025), none of which are expected to have a material impact on financial position or results of operations upon adoption, though the impact on disclosures is being assessed - No material changes to significant accounting policies were made from the **2024** Annual Report on Form **10-K**[24](index=24&type=chunk) - The company is evaluating **ASU 2023-09** (Income Taxes) effective for fiscal year ending **December 31, 2025**, for potential impact on financial statement disclosures[26](index=26&type=chunk) - The company is evaluating **ASU 2024-03** (Disaggregation of Income Statement Expenses) effective for annual periods beginning after **December 15, 2026**, for potential impact on financial statements and related disclosures[27](index=27&type=chunk) - The company is evaluating **ASU 2025-05** (Credit Losses for Accounts Receivable and Contract Assets) effective for annual reporting periods beginning after **December 15, 2025**, for potential impact on financial statements and related disclosures[28](index=28&type=chunk) [Note 3. Discontinued Operations](index=10&type=section&id=Note%203.%20Discontinued%20Operations) On September 6, 2024, Identiv completed the sale of its Physical Security Business for approximately $143.9 million in cash, and this business, which represented a significant strategic shift, is reported as discontinued operations for the 2024 periods presented, with the company also entering into a transition services agreement with the buyer, with immaterial fees earned/incurred for the current periods - Identiv completed the sale of its Physical Security Business on **September 6, 2024**, for approximately **$143.9 million** in cash[29](index=29&type=chunk) - The Physical Security Business results are reported as discontinued operations for the **2024** periods due to its significant strategic impact[31](index=31&type=chunk) Financial Results of Discontinued Operations (2024, in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :----------------------------- | | Net revenue | $17,592 | $33,428 | | Gross profit | $7,904 | $15,813 | | Income from operations | $756 | $1,624 | | Income from discontinued operations | $707 | $1,531 | [Note 4. Revenue](index=12&type=section&id=Note%204.%20Revenue) Revenue is recognized when control of products is transferred to customers, typically upon shipment or delivery, and for contracts with multiple performance obligations, the transaction price is allocated based on standalone selling price, with revenue from continuing operations disaggregated by customer shipping location (Americas, Europe and the Middle East, and Asia-Pacific) and recognized at a point-in-time - Revenue is recognized upon transfer of control of products to customers, generally at shipment or delivery[32](index=32&type=chunk) - Revenue is disaggregated by customer shipping location: Americas, Europe and the Middle East, and Asia-Pacific[33](index=33&type=chunk) [Note 5. Fair Value Measurements](index=12&type=section&id=Note%205.%20Fair%20Value%20Measurements) Identiv measures financial instruments using a fair value hierarchy (Level 1, 2, or 3), with recurring fair value measurements including cash equivalents (money market accounts and treasury bills) classified as Level 1, and non-recurring measurements including privately-held investments, classified as Level 3 due to unobservable inputs and lack of liquidity, which are reviewed for impairment - Cash equivalents (money market accounts and treasury bills) are measured at fair value on a recurring basis and classified as **Level 1**[35](index=35&type=chunk) - Privately-held investments are measured at fair value on a non-recurring basis if impairment is indicated and are classified as **Level 3** due to unobservable inputs[36](index=36&type=chunk) Cash Equivalents Measured at Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Money market accounts | $16,300 | $31,600 | | Treasury bills | $110,700 | $83,000 | [Note 6. Balance Sheet Components](index=13&type=section&id=Note%206.%20Balance%20Sheet%20Components) This note details the composition of inventories, property and equipment, and other accrued expenses and liabilities, with inventories decreasing from $7.475 million to $6.133 million, primarily in raw materials and finished goods, property and equipment, net, seeing a slight decrease, while other accrued expenses and liabilities also declined, notably due to the absence of purchase price adjustment amounts Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $3,162 | $3,893 | | Work-in-progress | $55 | $0 | | Finished goods | $2,916 | $3,582 | | Total | $6,133 | $7,475 | Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Total | $19,465 | $20,227 | | Accumulated depreciation | $(11,939) | $(12,533) | | Property and equipment, net | $7,526 | $7,694 | Other Accrued Expenses and Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Accrued professional fees | $516 | $526 | | Accrued warranties | $324 | $214 | | Amounts payable under Transition Services Agreement | $297 | $354 | | Amounts payable related to purchase price adjustment | $0 | $474 | | Other accrued expenses | $786 | $759 | | Total | $1,923 | $2,327 | [Note 7. Income Taxes](index=13&type=section&id=Note%207.%20Income%20Taxes) Identiv applies ASC 740 for income taxes and uncertain tax positions, and the company is generally not subject to tax examinations for years prior to 2020, though older years may be investigated if loss carryforwards are utilized, and the company does not expect a material change in unrecognized tax benefits within the next 12 months, with the recently signed 'One Big Beautiful Bill Act' (H.R. 1) being analyzed for tax impacts, but no material effect is anticipated - The company generally is no longer subject to tax examinations for years prior to **2020**[44](index=44&type=chunk) - The 'One Big Beautiful Bill Act' (**H.R. 1**), signed on **July 4, 2025**, will be accounted for in **Q3 2025**, with no material impact expected on financial statements[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 8. Stockholders' Equity](index=15&type=section&id=Note%208.%20Stockholders'%20Equity) This note details Series B convertible preferred stock, which accrues a cumulative annual dividend of 5% (first six years) then 3% (thereafter), convertible into common stock, and the company also has a stock repurchase program authorized for up to $10 million, under which 463,779 shares totaling $1.9 million have been repurchased as of June 30, 2025, with no repurchases occurring under this program during the six months ended June 30, 2025, but 105,862 shares were repurchased to satisfy tax withholding for RSU vesting Series B Convertible Preferred Stock and Dividend Accretion (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Balance at end of period (Preferred Stock) | $27,882 | $27,070 | | Number of Common Shares Issuable Upon Conversion (at end of period) | 6,971 | 6,767 | - The Series B convertible preferred stock has a cumulative annual dividend of **5%** for the first six years and **3%** thereafter, payable in kind upon conversion[48](index=48&type=chunk) - As of **June 30, 2025**, the company repurchased **463,779 shares** of common stock for approximately **$1.9 million** under its **$10 million Stock Repurchase Program**, with no repurchases under this program during the first six months of **2025**[50](index=50&type=chunk) - During the six months ended **June 30, 2025**, **105,862 shares** of common stock were repurchased to satisfy tax withholding obligations related to RSU vesting[51](index=51&type=chunk) [Note 9. Stock-Based Compensation](index=17&type=section&id=Note%209.%20Stock-Based%20Compensation) This note details stock option, restricted stock unit (RSU), and performance stock unit (PSU) activity, with no unrecognized compensation expense for stock options as of June 30, 2025, while for RSUs, $3.0 million of unrecognized expense remains, to be recognized over 2.06 years, and for PSUs, $890,000 of unrecognized expense remains, to be recognized over 0.5 years, with total stock-based compensation expense for continuing operations being $907,000 and $1.703 million for the three and six months ended June 30, 2025, respectively Stock-Based Compensation Expense (Continuing Operations, in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $5 | $5 | $10 | $12 | | Research and development | $32 | $43 | $52 | $77 | | Selling and marketing | $77 | $443 | $136 | $561 | | General and administrative | $793 | $494 | $1,505 | $854 | | Total | $907 | $985 | $1,703 | $1,504 | - As of **June 30, 2025**, there was **$3.0 million** of unrecognized compensation expense related to unvested RSUs, expected to be recognized over a weighted average period of **2.06 years**[54](index=54&type=chunk) - As of **June 30, 2025**, there was **$890,000** of unrecognized compensation expense related to unvested PSUs, expected to be recognized over a period of **0.5 years**[56](index=56&type=chunk) [Note 10. Net Loss per Common Share](index=19&type=section&id=Note%2010.%20Net%20Loss%20per%20Common%20Share) Basic and diluted net loss per common share from continuing operations was $(0.26) for the three months and $(0.47) for the six months ended June 30, 2025, with dilutive potential common shares, including RSUs, PSUs, stock options, and convertible preferred stock, excluded from the computation as their effect would be anti-dilutive due to the net loss Net Loss per Common Share (Continuing Operations) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss from continuing operations | $(6,042) | $(6,923) | $(10,831) | $(12,305) | | Net loss available to common stockholders | $(6,247) | $(6,449) | $(11,241) | $(11,255) | | Basic and diluted net loss per common share (Continuing Operations) | $(0.26) | $(0.31) | $(0.47) | $(0.55) | - Approximately **8.4 million** common stock equivalents were excluded from diluted net loss per share for the three and six months ended **June 30, 2025**, as their inclusion would have been anti-dilutive[61](index=61&type=chunk) [Note 11. Segment Reporting](index=19&type=section&id=Note%2011.%20Segment%20Reporting) Following the sale of its Physical Security Business in Q3 2024, Identiv now operates as a single reportable segment: the Internet of Things (IoT) Business segment, with the CODM (Chief Executive Officer) assessing performance and allocating resources based on consolidated loss from continuing operations, and geographic net revenue showing a shift in concentration, with Americas revenue decreasing significantly while Europe and the Middle East, and Asia-Pacific regions show smaller changes - Identiv now has one reportable segment: the **Internet of Things (IoT) Business segment**, following the sale of its Physical Security Business[63](index=63&type=chunk) Geographic Net Revenue (in thousands) | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :------------------------ | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Americas | $1,833 | $3,386 | -45.85% | $4,071 | $6,344 | -35.83% | | Europe and the Middle East | $1,964 | $2,068 | -5.03% | $3,751 | $4,606 | -18.56% | | Asia-Pacific | $1,243 | $1,287 | -3.39% | $2,487 | $2,449 | 1.55% | | Total | $5,040 | $6,741 | -25.23% | $10,309 | $13,399 | -23.06% | - One customer accounted for **19% of net revenue** for the three months ended **June 30, 2025**, and **18%** for the six months ended **June 30, 2025**[67](index=67&type=chunk) [Note 12. Restructuring and Severance](index=22&type=section&id=Note%2012.%20Restructuring%20and%20Severance) Restructuring expenses for the three and six months ended June 30, 2025, totaled $420,000 and $680,000, respectively, with these costs primarily including severance and impairment charges for an operating lease right-of-use asset, associated with the shutdown of the Singapore manufacturing facility Restructuring Expenses (in thousands) | Expense Type | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :----------- | :--------------------------- | :--------------------------- | | Severance costs | $312 | $334 | | Impairment of operating lease right-of-use asset | $108 | $346 | | Total | $420 | $680 | [Note 13. Leases](index=22&type=section&id=Note%2013.%20Leases) Identiv's leases are primarily operating leases for administrative, R&D, manufacturing, and sales offices globally, with total rent expense being $0.2 million for the three months and $0.4 million for the six months ended June 30, 2025, and the weighted average remaining lease term being 2.2 years, with a weighted average discount rate of 7.7%, and impairment charges of $108,000 and $346,000 recorded for a right-of-use asset at the Singapore manufacturing facility - Total rent expense was **$0.2 million** for the three months and **$0.4 million** for the six months ended **June 30, 2025**[70](index=70&type=chunk) - As of **June 30, 2025**, the weighted average remaining lease term for operating leases was **2.2 years**, and the weighted average discount rate was **7.7%**[72](index=72&type=chunk) - Impairment charges of **$108,000** and **$346,000** were recorded for an operating lease right-of-use asset at the Singapore manufacturing facility during the three and six months ended **June 30, 2025**, respectively[73](index=73&type=chunk) [Note 14. Commitments and Contingencies](index=23&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) Identiv's contractual commitments as of June 30, 2025, total $2.454 million, with the majority ($2.445 million) due in the remaining six months of 2025, primarily for purchase commitments, and the company provides product warranties ranging from 12 to 36 months, with allowances based on historical costs and sales activities, and warranty accruals and expenses have historically been immaterial Contractual Commitments (in thousands) | Year | Purchase Commitments | Other Contractual Commitments | Total | | :------------------------ | :------------------- | :---------------------------- | :---- | | 2025 (remaining six months) | $1,797 | $648 | $2,445 | | 2026 | $0 | $9 | $9 | | Total | $1,797 | $657 | $2,454 | - The company provides warranties on certain product sales for periods ranging from **12 to 36 months**, with allowances based on historical costs and sales activities[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Identiv's financial condition and results of operations, focusing on the IoT Business segment after the sale of the Physical Security Business, discussing factors affecting performance, detailed results of operations, liquidity, capital resources, and critical accounting estimates, with the company experiencing significant revenue decline and gross loss, attributed to lower RFID transponder sales, production transition costs, and underutilization of facilities, while managing liquidity with existing cash [Overview](index=24&type=section&id=Overview) Identiv has transitioned from two segments (Identity and Premises) to a single Internet of Things (IoT) Business segment following the sale of its Physical Security Business on September 6, 2024, with the IoT segment focusing on developing, manufacturing, and supplying specialized RFID IoT solutions for healthcare and other high-value markets, including NFC, HF, DF, UHF, and BLE devices - Identiv now operates as a single reportable segment: the **IoT Business segment**, after selling its Physical Security Business[80](index=80&type=chunk) - The **IoT Business segment** develops and supplies specialty IoT solutions, including various RFID technologies (**NFC, HF, DF, UHF, BLE**), for industries like pharmaceutical, medical devices, consumer electronics, and luxury goods[81](index=81&type=chunk) [Closing of Asset Sale](index=24&type=section&id=Closing%20of%20Asset%20Sale) On September 6, 2024, Identiv completed the sale of its Physical Security Business to Hawk Acquisition, Inc. for approximately $143.9 million in cash, and a transition services agreement was also entered into, outlining support for 12 to 18 months, with Identiv continuing as a public company, focusing solely on its IoT Business post-sale - The Physical Security Business was sold on **September 6, 2024**, for approximately **$143.9 million** in cash[82](index=82&type=chunk) - A transition services agreement was established to provide support to the buyer for **12 to 18 months** post-transaction[82](index=82&type=chunk) - Following the Asset Sale, Identiv, Inc. continues as a public company, focusing on its **IoT Business**[83](index=83&type=chunk) [Factors Affecting Our Performance](index=25&type=section&id=Factors%20Affecting%20Our%20Performance) Identiv's performance is influenced by RFID market adoption, which has been slower than anticipated for certain applications, leading to fluctuations in operating results and lower unit sales of BLE transponder products to a key customer, and the company completed the transition of RFID device production from Singapore to Thailand, aiming to increase gross margins, while competitive pricing pressure and macroeconomic conditions, including tariffs and foreign currency fluctuations, continue to negatively impact operating results and gross margins, and the Asset Sale significantly lowered revenue and gross margin profile, leading to expected continued losses until revenue scales up - Lower unit sales of **BLE transponder products** to a customer undergoing a technology transition have impacted operating results[84](index=84&type=chunk) - RFID market adoption, particularly in regulated industries like healthcare, has taken longer than anticipated[85](index=85&type=chunk)[86](index=86&type=chunk) - Production of RFID devices in Singapore was completed at the end of **Q2 2025**, with customers requalified in the Thailand facility, expected to increase gross product margins in **H2 2025**[90](index=90&type=chunk)[104](index=104&type=chunk) - Competitive pricing pressure and the company's strategy to exit low-margin business have negatively impacted operating results[92](index=92&type=chunk) - Macroeconomic conditions, including inflation, foreign currency fluctuations, and tariffs (e.g., **19% tariff** on imports from Thailand effective **July 31**), continue to affect costs and pricing[95](index=95&type=chunk)[149](index=149&type=chunk) - The Asset Sale, representing approximately **63% of 2023 revenue**, has significantly lowered the gross margin profile and revenue base, leading to expected continued losses[96](index=96&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Identiv experienced a significant decline in net revenue and a shift to gross loss for both the three and six months ended June 30, 2025, compared to 2024, with operating expenses decreasing, but not enough to offset the revenue and gross profit decline, resulting in a net loss, and non-operating income improved due to higher interest income, while foreign currency losses increased, and income from discontinued operations ceased after the 2024 sale Consolidated Results of Operations (Continuing Operations, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net revenue | $5,040 | $6,741 | -25% | $10,309 | $13,399 | -23% | | Gross profit (loss) | $(474) | $614 | -177% | $(342) | $1,097 | -131% | | Gross profit (loss) margin | -9% | 9% | | -3% | 8% | | | Total operating expenses | $5,913 | $7,334 | -19% | $11,513 | $12,880 | -11% | | Loss from continuing operations | $(6,387) | $(6,720) | -5% | $(11,855) | $(11,783) | 1% | | Net loss | $(6,042) | $(6,216) | -3% | $(10,831) | $(10,774) | 1% | [Net Revenue](index=28&type=section&id=Net%20Revenue) Net revenue for the three and six months ended June 30, 2025, decreased by 25% and 23% respectively, compared to the prior year, with this decline primarily driven by lower unit sales of RFID transponder products due to exiting low-margin business and reduced sales to a major customer working through safety stock built in 2024 Net Revenue (in thousands) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months | $5,040 | $6,741 | $(1,701) | -25.23% | | 6 Months | $10,309 | $13,399 | $(3,090) | -23.06% | - The decrease in net revenue was primarily due to lower unit sales of RFID transponder products as the company exits low-margin business opportunities and reduced sales to its largest customer[101](index=101&type=chunk) [Gross Profit (Loss) and Gross Margin](index=28&type=section&id=Gross%20Profit%20(Loss)%20and%20Gross%20Margin) Identiv reported a gross loss of $474,000 (9% margin) for the three months and $342,000 (3% margin) for the six months ended June 30, 2025, a significant decline from gross profits in 2024, mainly due to incremental costs from the production transition to Thailand, dual manufacturing sites, underutilization of facilities, and a $639,000 obsolete inventory write-down in Singapore, with gross margins expected to increase in H2 2025 with the elimination of fixed costs from the Singapore facility Gross Profit (Loss) and Margin (in thousands) | Period | Gross Profit (Loss) 2025 | Gross Profit 2024 | % Change | Gross Margin 2025 | Gross Margin 2024 | | :----- | :----------------------- | :---------------- | :------- | :---------------- | :---------------- | | 3 Months | $(474) | $614 | -177% | -9% | 9% | | 6 Months | $(342) | $1,097 | -131% | -3% | 8% | - Decreases in gross profit margins were primarily due to incremental costs from the Thailand production transition, dual manufacturing sites, underutilization of facilities, and a **$639,000** obsolete inventory write-down in Singapore[103](index=103&type=chunk) - Gross product margins are expected to increase in the second half of **2025** due to the elimination of fixed costs from the Singapore facility[104](index=104&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses) Total operating expenses decreased by 19% for the three months and 11% for the six months ended June 30, 2025, compared to 2024, with this reduction driven by lower R&D, selling and marketing, and general and administrative expenses, partially offset by new restructuring and severance costs related to the Singapore facility shutdown Total Operating Expenses (in thousands) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months | $5,913 | $7,334 | $(1,421) | -19.38% | | 6 Months | $11,513 | $12,880 | $(1,367) | -10.61% | [Research and Development](index=30&type=section&id=Research%20and%20Development) Research and development expenses decreased by 8% for the three months and 10% for the six months ended June 30, 2025, primarily due to lower external services and prototype costs, however, as a percentage of net revenue, R&D increased due to the overall decline in revenue Research and Development Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $890 | $966 | -8% | | 6 Months | $1,677 | $1,863 | -10% | - R&D expenses decreased in dollars due to lower external services and prototype costs but increased as a percentage of revenue due to lower revenue levels[108](index=108&type=chunk) [Selling and Marketing](index=30&type=section&id=Selling%20and%20Marketing) Selling and marketing expenses decreased by 15% for the three months and 1% for the six months ended June 30, 2025, mainly due to lower stock-based compensation, advertising, trade show, and travel costs, and similar to R&D, these expenses increased as a percentage of net revenue due to the revenue decline Selling and Marketing Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $1,546 | $1,828 | -15% | | 6 Months | $2,953 | $2,997 | -1% | - Selling and marketing expenses decreased in dollars due to lower stock-based compensation, advertising, trade show, and travel costs, but increased as a percentage of revenue[110](index=110&type=chunk) [General and Administrative](index=30&type=section&id=General%20and%20Administrative) General and administrative expenses decreased by 33% for the three months and 23% for the six months ended June 30, 2025, with the three-month decrease primarily due to the non-recurrence of $1.6 million in strategic review-related costs from 2024, and the six-month decrease also due to $2.6 million in strategic review costs in 2024, partially offset by higher stock-based compensation in 2025 General and Administrative Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $3,057 | $4,540 | -33% | | 6 Months | $6,203 | $8,020 | -23% | - The decrease in G&A expenses was primarily due to the non-recurrence of strategic review-related costs from the Asset Sale in **2024** (**$1.6 million** for **Q2**, **$2.6 million** for **H1**)[112](index=112&type=chunk) [Restructuring and Severance](index=30&type=section&id=Restructuring%20and%20Severance) Restructuring and severance expenses were $420,000 for the three months and $680,000 for the six months ended June 30, 2025, representing a 100% increase from 2024 (where there were no such costs), with these costs associated with severance and impairment of an operating lease right-of-use asset due to the shutdown of the Singapore manufacturing facility Restructuring and Severance Expenses (in thousands) | Expense Type | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :----------- | :--------------------------- | :--------------------------- | | Severance costs | $312 | $334 | | Impairment of operating lease right-of-use asset | $108 | $346 | | Total | $420 | $680 | - Restructuring expenses in **2025** primarily consist of severance costs and impairments of an operating lease right-of-use asset related to the shutdown of the Singapore manufacturing facility[113](index=113&type=chunk) [Non-operating Income (Expense)](index=30&type=section&id=Non-operating%20Income%20(Expense)) Non-operating income significantly improved for the three and six months ended June 30, 2025, primarily due to a substantial increase in net interest income from money market accounts and treasury bills, however, foreign currency losses also increased significantly, mainly due to exchange rate movements between the U.S. Dollar, Euro, and Thai Baht Non-operating Income (Expense) (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Interest income (expense), net | $1,320 | $(149) | N.M. | $2,532 | $(236) | N.M. | | Foreign currency losses, net | $(870) | $(59) | N.M. | $(1,400) | $(285) | 391% | - The increase in net interest income was primarily due to interest earned on money market accounts and treasury bills[116](index=116&type=chunk) - Foreign currency losses increased significantly due to exchange rate movements between the **U.S. Dollar**, **Euro**, and **Thai Baht**[117](index=117&type=chunk) [Income Tax Provision](index=31&type=section&id=Income%20Tax%20Provision) Identiv recorded an income tax provision for the three and six months ended June 30, 2025, primarily due to withholding taxes on interest income from a foreign subsidiary, with the effective tax rates differing from the federal statutory rate of 21% mainly due to a full valuation allowance against net U.S. and foreign deferred tax assets and provisions in certain foreign jurisdictions with higher tax rates Income Tax Benefit (Provision) (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $(105) | $5 | N.M. | | 6 Months | $(108) | $(1) | N.M. | - A full valuation allowance is provided against all net U.S. and foreign deferred tax assets due to historical operating losses and difficulty in forecasting future results[118](index=118&type=chunk) - The income tax provision is primarily associated with withholding taxes on interest income earned at a foreign subsidiary[119](index=119&type=chunk) [Income from Discontinued Operations, net of tax](index=31&type=section&id=Income%20from%20Discontinued%20Operations,%20net%20of%20tax) There was no income from discontinued operations for the three and six months ended June 30, 2025, compared to $707,000 and $1,531,000 respectively in 2024, reflecting the completion of the Physical Security Business sale in September 2024 Income from Discontinued Operations, net of tax (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $0 | $707 | -100% | | 6 Months | $0 | $1,531 | -100% | - The absence of income from discontinued operations in **2025** is a direct result of the sale of the Physical Security Business in **September 2024**[120](index=120&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Identiv's working capital was $137.5 million, a decrease of $7.4 million from December 31, 2024, with cash and cash equivalents at $129.3 million, and the company believes existing cash and cash generated from operations will be sufficient for the next twelve months and beyond, despite historical operating losses and negative cash flows, and Identiv has a stock repurchase program of up to $10 million, under which $1.9 million has been repurchased as of June 30, 2025, with no activity in the first half of 2025 Liquidity Metrics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Working capital | $137,470 | $144,885 | | Cash and cash equivalents | $129,339 | $135,646 | - The company believes its existing cash and cash equivalents, along with cash from operations, will be sufficient to fund operations for the next twelve months and beyond[125](index=125&type=chunk) - As of **June 30, 2025**, **$1.9 million** has been repurchased under the **$10 million Stock Repurchase Program**, with no repurchases during the three and six months ended **June 30, 2025**[122](index=122&type=chunk) - Cash used in operating activities for the six months ended **June 30, 2025**, was **$6.8 million**, primarily due to a net loss of **$10.8 million**[127](index=127&type=chunk) [Contractual Obligations](index=34&type=section&id=Contractual%20Obligations) Identiv's contractual obligations include operating lease agreements and purchase commitments for inventories, with purchase commitments highly dependent on customer demand and potentially leading to cancellation charges, and the company is unable to reliably estimate the timing of payments for gross unrecognized tax benefits and related interest and penalties - Contractual obligations include operating lease agreements and purchase commitments for inventories[132](index=132&type=chunk)[133](index=133&type=chunk) - The company cannot reliably estimate the timing of payments for gross unrecognized tax benefits and related interest and penalties[134](index=134&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) Identiv has not entered into any off-balance sheet arrangements or issued guarantees to third parties - The company has not entered into off-balance sheet arrangements or issued guarantees to third parties[135](index=135&type=chunk) [Climate Change](index=34&type=section&id=Climate%20Change) Identiv believes that neither climate change nor related governmental regulations have had a material effect on its business, financial condition, or results of operations - Climate change and related governmental regulations have not had a material effect on the company's business, financial condition, or results of operations[136](index=136&type=chunk) [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) Identiv's critical accounting estimates, which involve significant judgments and assumptions, relate to revenue recognition, inventory, income taxes, long-lived assets, and stock-based compensation, and management believes there have been no significant changes to these critical accounting policies and estimates during the three months ended June 30, 2025 - Critical accounting estimates include revenue recognition, inventory, income taxes, long-lived assets, and stock-based compensation[137](index=137&type=chunk) - No significant changes to critical accounting policies and estimates were made during the three months ended **June 30, 2025**[138](index=138&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 2, 'Significant Accounting Policies and Recent Accounting Pronouncements,' for a description of recent accounting pronouncements and their potential impact on the company's financial statements - Refer to **Note 2** for details on recent accounting pronouncements[139](index=139&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is marked as 'Not applicable,' indicating that Identiv does not have material quantitative and qualitative disclosures about market risk for the reporting period - This item is not applicable for the current reporting period[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Identiv's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, and no material changes were made to internal control over financial reporting during the three months ended June 30, 2025 [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Identiv's CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025, with these controls designed to ensure timely and accurate reporting of information required under the Exchange Act - The CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of **June 30, 2025**[143](index=143&type=chunk) [Changes in Internal Controls over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) No changes to Identiv's internal control over financial reporting occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No material changes were made to internal control over financial reporting during the three months ended **June 30, 2025**[144](index=144&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) Identiv is, and may become, subject to various legal proceedings and claims in the ordinary course of business, and the outcome of such proceedings cannot be predicted with certainty and could materially affect the company's financial condition, results of operations, or cash flows - The company is subject to various legal proceedings and claims, the outcome of which is uncertain and could have a material effect on financial results[146](index=146&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Identiv's business faces numerous risks, including those detailed in its 2024 Annual Report on Form 10-K, and a new material risk factor is the impact of changes in U.S. trade policy and tariffs, specifically a 19% tariff on imports from Thailand effective July 31, 2025, which could increase costs, reduce demand, and negatively affect revenue and gross margin, despite efforts to mitigate these impacts - No material changes to risk factors from the **2024** Annual Report on Form **10-K**, except for the impact of U.S. trade policy and tariffs[147](index=147&type=chunk) - Approximately **25%** of the company's business is exposed to U.S. tariffs due to manufacturing in Thailand, with a **19% tariff** on imports from Thailand announced effective **July 31, 2025**[149](index=149&type=chunk) - Tariffs could increase costs, and there is no assurance that mitigation efforts (e.g., pass-through strategy, supply chain optimization) will successfully offset these costs or prevent negative impacts on revenue and gross margin[149](index=149&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2025, Identiv repurchased 58,324 shares of its common stock at an average price of $3.19 per share, with these repurchases solely to satisfy tax withholding obligations related to the vesting of Restricted Stock Units (RSUs) issued to employees, and no repurchases made under the Stock Repurchase Program during this period Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 44,878 | $3.16 | | May 1, 2025 – May 31, 2025 | 798 | $3.34 | | June 1, 2025 – June 30, 2025 | 12,648 | $3.27 | | Total | 58,324 | $3.19 | - Shares were repurchased to satisfy tax withholding obligations in connection with the vesting of RSUs, not under the Stock Repurchase Program[152](index=152&type=chunk)[153](index=153&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" - No director or officer adopted or terminated **Rule 10b5-1** or non-**Rule 10b5-1** trading arrangements during the quarter ended **June 30, 2025**[154](index=154&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Restated Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act), and Inline XBRL documents - Exhibits include corporate governance documents (Restated Certificate of Incorporation, Amended and Restated Bylaws) and certifications from the **CEO** and **CFO**[156](index=156&type=chunk) - Certifications under **18 U.S.C. Section 1350** (Sarbanes-Oxley Act **Section 906**) are furnished, not filed, and not incorporated by reference into other filings unless specifically stated[157](index=157&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) The report is duly signed on August 8, 2025, by Kirsten Newquist, Chief Executive Officer (Principal Executive Officer), and Ed Kirnbauer, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), certifying its submission pursuant to the Securities Exchange Act of 1934 - The report was signed by **Kirsten Newquist**, **CEO**, and **Ed Kirnbauer**, **CFO**, on **August 8, 2025**[163](index=163&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Hudson Global, Inc. show a slight decrease in revenue and an increased net loss for the second quarter of 2025 compared to 2024, with improved cash flow from operations. [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, revenue slightly decreased to $35.5 million, resulting in a wider net loss of $688 thousand, while the six-month period saw a narrowed net loss despite a revenue decline. Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $35,541 | $35,712 | $67,407 | $69,603 | | **Operating Loss** | $(211) | $(187) | $(1,935) | $(3,227) | | **Net Loss** | $(688) | $(441) | $(2,444) | $(3,339) | | **Diluted Loss Per Share** | $(0.23) | $(0.15) | $(0.82) | $(1.10) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $55.6 million, driven by higher accounts receivable, while total liabilities also rose to $15.4 million, leading to a slight decrease in stockholders' equity. Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,837 | $17,011 | | Accounts receivable, net | $23,549 | $20,093 | | **Total Current Assets** | **$43,293** | **$40,140** | | **Total Assets** | **$55,577** | **$52,583** | | **Total Current Liabilities** | **$14,256** | **$11,222** | | **Total Liabilities** | **$15,447** | **$12,155** | | **Total Stockholders' Equity** | **$40,130** | **$40,428** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly improved to $0.7 million for the six months ended June 30, 2025, compared to $6.1 million in the prior year, with minimal impact from investing and financing activities. Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(663) | $(6,058) | | Net cash (used in) provided by investing activities | $(43) | $1,053 | | Net cash used in financing activities | $(31) | $(2,580) | | **Net decrease in cash, cash equivalents, and restricted cash** | **$(144)** | **$(7,891)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's RPO business, a pending merger with Star Equity Holdings, strategic expansions, and the post-quarter acquisition of Alpha Consulting Group in Japan. - The company entered into a merger agreement with Star Equity Holdings, Inc. on May 21, 2025, which, if consummated, will transform Hudson into a diversified holding company[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - On July 23, 2025, the company acquired Alpha Consulting Group ("ACG"), a Japan-based recruitment services provider, marking its entry into the Japanese market[129](index=129&type=chunk) Disaggregation of Revenue (in thousands) | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | RPO | $17,428 | $17,770 | $33,170 | $33,608 | | Contracting | $18,113 | $17,942 | $34,237 | $35,995 | | **Total Revenue** | **$35,541** | **$35,712** | **$67,407** | **$69,603** | - The company manages its business across three reportable geographic segments: Americas, Asia Pacific, and EMEA, with **Asia Pacific being the largest segment by revenue** ($40.7 million) for the six months ended June 30, 2025[105](index=105&type=chunk)[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes a slight revenue decline in H1 2025 to challenging market conditions, while EBITDA loss improved, and the company maintains sufficient liquidity. - The company is facing challenging market conditions due to persistent inflation, higher interest rates, and decreased demand for labor in certain markets, which are expected to continue into the next quarter[139](index=139&type=chunk)[140](index=140&type=chunk) - A pending merger with Star Equity Holdings, Inc. was announced on May 21, 2025, which, if completed, will transform the company into a diversified holding company[137](index=137&type=chunk)[138](index=138&type=chunk) Financial Performance Highlights - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $35.5M | $35.7M | $(0.2)M | -0.5% | | Adjusted Net Revenue | $18.6M | $17.6M | $1.0M | +5.8% | | EBITDA (loss) | $(0.2)M | $0.0M | $(0.2)M | N/A | | Net Loss | $(0.7)M | $(0.4)M | $(0.3)M | N/A | Financial Performance Highlights - H1 2025 vs H1 2024 | Metric | H1 2025 | H1 2024 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $67.4M | $69.6M | $(2.2)M | -3.2% | | Adjusted Net Revenue | $35.0M | $33.9M | $1.1M | +3.2% | | EBITDA (loss) | $(1.7)M | $(2.7)M | $1.0M | N/A | | Net Loss | $(2.4)M | $(3.3)M | $0.9M | N/A | [Results of Operations - Americas](index=34&type=section&id=Results%20of%20Operations%20-%20Americas) The Americas segment reported revenue growth of 2% in Q2 2025 and 8% in H1 2025, driven by new contracting clients, leading to an improved EBITDA of $0.1 million for H1 2025. Americas Performance (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $7.1 | $7.0 | $14.0 | $13.0 | | Adjusted Net Revenue | $6.3 | $6.3 | $12.3 | $12.1 | | EBITDA (loss) | $0.2 | $0.4 | $0.1 | $(0.5) | - For H1 2025, **contracting revenue increased by 478%** due to new client engagements, while RPO revenue decreased by 6% due to lower demand from existing clients[155](index=155&type=chunk) [Results of Operations - Asia Pacific](index=36&type=section&id=Results%20of%20Operations%20-%20Asia%20Pacific) Asia Pacific revenue decreased by 3% in Q2 2025 and 5% in H1 2025 on a constant currency basis, primarily due to a decline in contracting revenue in Australia, yet profitability significantly improved with H1 2025 EBITDA reaching $1.7 million. Asia Pacific Performance (in millions, constant currency) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21.6 | $22.2 | $40.7 | $42.9 | | Adjusted Net Revenue | $8.8 | $7.5 | $16.0 | $13.9 | | EBITDA (loss) | $1.4 | $0.2 | $1.7 | $(0.4) | - In Australia, H1 2025 revenue declined **10%** due to a **17% decrease in contracting revenue**, partially offset by a **12% increase in RPO revenue**[167](index=167&type=chunk) [Results of Operations - EMEA](index=38&type=section&id=Results%20of%20Operations%20-%20EMEA) EMEA constant currency revenue increased by 6% in Q2 2025 but remained flat for H1 2025, with a 22% increase in contracting revenue offset by a 14% decrease in RPO revenue, resulting in an EBITDA loss of $1.3 million for H1 2025. EMEA Performance (in millions, constant currency) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6.8 | $6.4 | $12.7 | $12.8 | | Adjusted Net Revenue | $3.5 | $3.8 | $6.7 | $7.8 | | EBITDA (loss) | $(0.7) | $0.2 | $(1.3) | $0.5 | - The increase in SG&A and Non-Op for H1 2025 was primarily the result of higher consultant staff costs[192](index=192&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company maintained **$17.5 million in cash and equivalents**, with significantly improved operating cash flow and an undrawn Australian invoice finance facility, indicating sufficient liquidity for the next 12 months. Cash Position (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | $17.5 | $17.7 | - Net cash used in operating activities decreased by **$5.4 million** in H1 2025 compared to H1 2024, driven by more favorable working capital and a lower net loss[206](index=206&type=chunk) - The company has access to a **4 million Australian dollar invoice finance credit facility**, which was undrawn as of June 30, 2025[209](index=209&type=chunk)[211](index=211&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Hudson Global, Inc. is exempt from providing quantitative and qualitative disclosures about market risk. - As a smaller reporting company, Hudson Global, Inc. is not required to provide quantitative and qualitative disclosures about market risk[222](index=222&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting. - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[223](index=223&type=chunk) - No material changes were made to the company's internal control over financial reporting during the six months ended June 30, 2025[224](index=224&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any pending legal proceedings expected to have a material adverse effect on its financial condition or results of operations. - The company reports no pending legal proceedings that would be reasonably expected to have a material adverse effect[226](index=226&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) The company incorporates by reference risk factors from its 2024 Annual Report on Form 10-K and additional risks related to the pending merger from its Registration Statement on Form S-4. - Risk factors are incorporated by reference from the company's 2024 Form 10-K and the Form S-4 filed on July 23, 2025, related to the pending merger[227](index=227&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any common stock during Q2 2025, with approximately $2.1 million remaining available under its authorized share repurchase program. - No shares were repurchased during the three months ended June 30, 2025[228](index=228&type=chunk)[229](index=229&type=chunk) - As of June 30, 2025, approximately **$2,118,651 remained available** under the company's share repurchase program authorized on August 8, 2023[229](index=229&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) The report includes key exhibits such as the merger agreement with Star Equity Holdings, CEO and CFO certifications, and iXBRL formatted financial statements. - Key exhibits filed include the merger agreement with Star Equity Holdings, Inc. and Sarbanes-Oxley certifications by the CEO and CFO[233](index=233&type=chunk)